Zero Days on Market and Just in Time

Build a house today; sell it tomorrow at full price. Zero days on the market and full margin almost every time. It sounds fantastic, but "make one, sell one" or just-in-time manufacturing has been the goal in other industries for years, and it can be a realistic goal for home builders.

Home builders must make mission-critical decisions every day: which land to buy and develop, which types of communities to offer, which floor plans to build in each community and in what proportions, which features to put in each home, how to market and advertise each community, and how to close a particular buyer on a particular house. Fortunately, you can empower your company in each of these decisions with a single tool: a timely, detailed map of home buyer preferences.

Make one, sell one depends on one thing: knowing in detail what buyers want regarding each home feature (e.g., bedrooms, bathrooms, size, lot, location, community amenities, price) at the time a house hits the market.

Developing the best land parcels requires knowing that the land is in the "right" location and offers the "right" natural features - a lake or mountains, for example. Building a sought-after community requires knowing the "right" amenities - a security gate, tennis courts or a pool. Selecting the "right" floor plans and the "right" home features requires a deep understanding of how home buyers consider each of these in their buying decisions and balance them against price. In short, what is it worth to them to get that extra bedroom, be 10 miles closer to the office or have that pool in the community? How to market this community demands certainty about the "right" features to advertise that will best push prospects' hot buttons. It also requires that this preference map can be analyzed by market segment to determine appropriate channels and placements for these ads.

It's important to note that "right" is not objectively defined. It is defined by home buyer preferences in each location and at each point in time. Notwithstanding the difficulty of definition, "right" has huge profit and revenue implications for every home builder every day.

Ultimately, it is home buyers' confidence in the value of the lot, community, house and home features that brings buyers to a model home and compels them to purchase sooner and at a higher price. The only way to instill this confidence is by 1) being on target with home buyer preferences through the land, community and home development processes and 2) communicating that perfect fit to buyers during the marketing and sales processes. The preference map is critical for both.

We construct a preference map for a single home buyer through what I call a "collaborative customer conversation" that goes though four steps. First, ask the home buyer for a "gut feel" about which community and home features are important. The buyer will not respond with much confidence, so the second step is to test the buyer with trade-offs that will reinforce or refine his/her choices. Third, present the preference map to the prospect for final agreement. Finally, recommend homes that best fit the buyer's complete set of preferences and with each recommendation explain why the house meets the prospect's needs. The home buyer now has the confidence to move forward with the purchase and justification for the asking price.

Every new home buyer's preference map provides rich data that can be used to extend the overall preference map for the entire marketplace. This global preference map then fully integrates a home building enterprise's strategy behind everything from land acquisition to community planning to floor planning to outbound marketing and finally into sales and customer service. All are driven by what is most important: the real-time, firsthand preferences of home buyers.

To learn more about preference mapping and how to leverage it in your home building enterprise, request my paper "Sharing Secrets" by e-mailing Michael.Morrison@onlineinsight.com.

Bradley Fordham, Ph.D., has held leadership positions in advanced technology and product development with Oracle, the National Institute of Standards and Technology, AT&T and General Electric. He advises U.S. government agencies and Fortune 100 global technology companies, and currently serves as the chief technology officer for  Online Insight Inc. in Atlanta. He received bachelor of science and bachelor of arts degrees from Furman University and his master's and Ph.D. in computer science from the University of Maryland.